2014 BUDGET – PERSONAL FINANCE

Personal Finance changes in the 2014 budget affect us all and in particular people looking to take their pension monies and retire in the next few years.

Pensions

From 2015, pensioners will have be able to withdraw their pension funds as they like and will not be forced to buy an annuity at any point.

From 27th March, the value of guaranteed income people need to qualify for flexible access to their funds will fall from £20,000 to £12,000. The total pension savings that can be taken as a lump sum will rise from £18,000 to £30,000. The capped drawdown withdrawal limit will be increased from 120% to 150% of an equivalent annuity. The maximum size of a small pension pot that can be taken as a lump sum will increase from £2,000 to £10,000.

From April 2015, the 10p rate for low-rate savers will be axed.

A pensioner bond will be open to everyone over 65 from January next year. A maximum of £10,000 can be invested. The Chancellor suggested a one-year bond might receive a return of 2.8% and a four-year bond 4%.

Savings & Investments

From 1 July, cash ISAs and stocks and shares ISA limits will be merge to form a New ISA (NISA) limit that will be raised to £15,000 a year. This means that the entire £15,000 can be saved as cash or split as a saver or investor chooses. This will allow savings currently held in stocks and shares to be transferred to cash.

Junior ISA (JISA) limits will increase to £4,000 a year.

The limit that you can hold in Premium Bonds has been extended to £40,000 from June this year and will rise to £50,000 in 2015. The number of premium bond £1million winners will also be doubled.

Income Tax

The personal allowance (the amount free from income tax) will rise to £10,500 on 6 April 2014.

The higher rate tax band will rise to £42,285 next year

Childcare

The tax-break available under the new child-care system will be extended. From Autumn 2015, for every 80p parents spend on childcare the Government will add another 20p, up to £10,000 a year for each child – up from the £8,000 previously outlined.

Help to Buy

It has been confirmed that the first-phase of Help To Buy, which gives buyers an interest-free loan of up to 20% of a deposit to buy a new-build home, has been extended until 2020.

As well as the above 2014 Budget Personal Finance changes, there were many changes on Duties which could strongly affect day-to-day spending and some movements in the markets.

Duties

Alcohol – Tax will rise in line with inflation, except on spirits and cider. Beer duty will be cut by 1p.

Tobacco – The escalator on duty at 2% above inflation will be extended until 2015.

Bingo – Bingo! The Chancellor announced that tax on the game will be cut from 20% to 10%.

Fuel duty – The tax will remain frozen.

Energy – A £7bn package has been announced to cut energy bills for businesses and households.